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Taiwan Semiconductor (NYSE: $TSM) Releases Q4 Results – Forecast Sales Growth in 2024

Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)

Taiwan Semiconductor Manufacturing Company Limited (NYSE: $TSM) is a Taiwanese semiconductor manufacturer that sells chips to clients globally. The company released its Q4 earnings report on Thursday, January 18, 2024. TSMC forecasted growth in 2024, which sent the stock rising.

TSMC Fourth Quarter Results

TSMC’s Q4 results revealed the company beat earnings estimates while raising its guidance for 2024. The company reported a consolidated revenue of $19.92 billion, a net income of $7.60 billion, and a diluted EPS of $1.44 for the quarter.

Revenue growth for the quarter was relatively flat year-over-year. Meanwhile, net income and diluted EPS both fell 19.3%. However, compared to Q3, the Q4 results represented a 14.4% growth in revenue, and a 13.1% increase in net income. In US dollars, revenue was up 13.6% from the previous quarter, while it fell 1.5% Y/Y.

TSMC reported a gross margin of 53%, an operating margin of 41.6%, and a net profit margin of 38.2% for the quarter. According to the report, growing demand for their industry-leading 3-nanometer chip has been crucial to Q4 performance. The report stated that 3nm chips accounted for 15% of all wafer revenue.

For FY23, TSMC reported an 8.7% decline in revenue to $69 billion. The decline was mainly due to a challenging year for the global semiconductor sector. However, TSMC’s technology leadership allowed them to outperform the foundry industry.

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Upbeat 2024 Outlook

According to Wendell Huang, VP and CFO of TSMC, they expect business to be impacted by seasonality in the smartphone sector. However, that would be partially offset by rising demand for chips in high-performance computing.

For the first quarter of 2024, the company projects revenue of $18-18.8 billion. In 2024, they predict a gross profit margin of 52%-54% and an operating margin of 40%-42%. Management also projects a capital budget of $28-$32 billion for the full year.

In his remarks, C.C. Wei, the TSMC CEO, stated that in 2024, they expect the semiconductor market, excluding memory, to grow over 10% Y/Y. He also forecast the foundry industry would grow by around 20%. Wei added that they expect to outperform the overall industry in 2024. He projected quarter-over-quarter growth for 2024, with a projected low to mid-20 % growth in revenue in US dollars.

The CEO added that they expect revenue from their 3nm technology to grow more than threefold in 2024 and account for mid-teen percent of total wafer revenue. He said that with the rise of AI, TSMC was set to capture a huge portion of the AI chip market.

Wei noted that they were working with almost all AI innovators. He added that they had observed an increased level of customer engagement for 2nm chips compared to 3nm chips at the same stage of development. According to Wei, their 2nm chips will be the most advanced chip technology in terms of efficiency and density when they launch in 2025.

US Semiconductor Index Rises on Upbeat TSMC Guidance

The S&P 500 (^GSPC) index closed trading 0.88% higher on January 18, 2024, on the upbeat forecast issued by TSMC. At one point, it spiked by nearly 2% during late afternoon trading. The semiconductor index (^SOX) rose 65% in 2023 and hit its all-time high of 4,233.73 on December 28, 2023, helping to boost the overall market amidst rising optimism on AI demand.

TSMC’s Stock Performance

TSMC’s US-listed shares (TSM) closed trading on January 18, 2024, 9.79% higher at $113.03 per share based on an upbeat outlook. The rise was the biggest percentage gain for stocks listed on the S&P 500 (^GSPC) index. In the past 12 months, TSMC’s NYSE-listed shares have gained 27.86%.

Stock Forecast: $TSM

Stock analysts are bullish on TSM stock, giving it a strong buy rating. They predict a relatively wide range for the stock of $115 to $135. Their median target for the stock is $125, which is a 10.59% upside.

TSMC Stock

Should You Buy TSM Stock?

TSMC said that it expects growth in every quarter of 2024. It also noted that it was optimally positioned to benefit from the continuing surge in AI chip demand. Furthermore, the semiconductor manufacturer is set to release its 2-nanometer chips in 2025. The chip will offer an unparalleled level of efficiency and density.

Based on all of these factors, TSMC’s business is primed for growth for years to come. As a result, the current strong buy rating by analysts seems to be an accurate representation of its future performance.

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